Financial planners are helping affluent families confront a financial quandary that most families didn't face 30 or 40 years ago: how to plan for both their retirement and their children's college tuition.

National studies show that most Americans run the risk of running out of money in retirement amid record unemployment, declining wealth, low savings rates, investment losses and falling home values.

"It really is a dilemma," says Scott M. Kahan, a CFP with New York-based Financial Asset Management Corp (FAMC). "Because most people today obviously can't do both together: When you tell people what they need to save for college and for retirement, all of a sudden it becomes a number that on a monthly basis they can't afford to save."
Jean C. Setzfand, vice president of Financial Security for AARP, tells parents, particularly those facing hard financial choices, "Don't feel guilty about putting retirement first."

Some parents apparently aren't feeling such pangs. The March edition of Chicago-based Spectrem Research's newsletter Millionaire's Corner says investors are seven times more likely to identify "adequate retirement savings"--as opposed to college tuition--as their primary financial concern.

In fact, retirement savings surpass the entire menu of financial worries, including job security, personal debt, home values, inflation and health-care costs, while college tuition comes in dead last. According to Spectrem, only 4% of investors identify college costs as their top financial concern, compared with nearly 28% who say they are most worried about saving enough money to last through retirement.

Yet despite those lopsided statistics, financial advisors who specialize in retirement and educational planning say many of their clients are still choosing to put their children's education first.

"We're seeing a lot of clients who are kind of mortgaging their future for their children's education," says Margaret K. O'Meara, president of Red Bank, N.J.-based O'Meara Financial Group. "But we tell them you need a plan for retirement first and education secondly."

The reason, says O'Meara, is that investors have more options to fund their children's college. She says her firm recently compiled a study on how families can structure educational savings plans.

FAMC's Kahan typically advises clients to first put the maximum amount possible in their retirement plans. "One, because they get tax deferral often; two, they can have access to that money later on, where when you fund into a college savings plan, it's there to pay for college bills. You can always borrow if need be for college, but you can't really borrow for retirement."

To better the chances of meeting both retirement and college tuition goals, recommends taking full advantage of employer-sponsored retirement plans, such as 401(k)s, and other retirement vehicles, such as IRAs. The accounts can offer tax advantages and employer-matching funds. If possible, parents are also advised to start setting aside money for college tuition as early as possible, ideally in the child's first year.